Capital markets remain conducive to M&A activity. Last week North American markets were unchanged with 95%+ of the S&P 500 companies reporting Q3 results. However, the Russell 2000 rose by 2.3%, indicating a rotation into small capitalization stocks. The brick and motor store sales from Black Friday are expected to be lower compared to last year as consumers move toward online discount retailers. Credit conditions remain favorable.

The equity and debt markets remain conducive to M&A activity. Last week, the North American equity markets rebounded from last week’s drop, with all broad indices increasing significantly. Positive earnings releases from U.S. discount retailers and a positive U.S. economic outlook contributed to the surge in stock prices. The terrorist attack on Paris had very little impact on the North American markets. The VIX declined by 23.0% and credit markets were unchanged versus last week.

Anticipation of a Fed rate hike before the end of the year and retail sector weakness have had a negative impact on the North American equity markets. Last week the S&P 500 and the TSX Composite declined by 3.6% and 3.5% respectively. The fear index jumped 40 percent from last week. The latest reported inflation number, 1.9%, and the strong October employment numbers are pointing to a likely Fed rate hike in December. The factors also impacted credit markets as spreads increased.

Surging U.S. job growth had a positive impact on the North American indices. The S&P 500 index increased by 1.0% and TSX Composite increased by 0.2%. The U.S. Treasury bond rate increased slightly in anticipation of a federal rate hike in December 2015. The VIX declined by 4.9%, indicating the market shrugged off the rate hike signal from the Fed.

Last week, the North American equity markets were virtually unchanged from the prior week, with the exception of the TSX Composite, which declined 3%, reflecting slower than expected Canadian GDP growth (+0.1%). The results of the stress test on the Greek banking sector revealed a capital deficit of only $15.8 billion provided some relief. The credit spread on mid-market loans continues to fall, reflecting favorable credit conditions.